Renewable energy, to many governments today, is an effective solution for the shortage of natural fuels that are used to produce energy. Barack Obama, a former American President, said that “To truly transform our economy, protect our security, and save our planet from the ravages of climate change, we need to ultimately make clean, renewable energy the profitable kind of energy”. Like a lot of developed countries, Vietnam also takes an eye on developing renewable energy and opens more opportunities for investors to enter this sector. This article will give you a deeper knowledge of the renewable energy sector in Vietnam and how to invest in it.
Before getting insights about renewable energy in Vietnam, we should know what renewable energy is and which natural sources Vietnam uses to create energy. Renewable energy is produced by exploiting natural resources from the earth which are naturally replenished on the human time scale namely sun, water, tides, wind, geothermal heat and so forth. Renewable energy is an alternative to traditional energy using fossil fuels without posing threats to the environment.
Vietnam’s expectation in renewable energy
Demand for energy in Vietnam has increased up to 11.4% from 2016 to 2020 and is forecasted to rise 7 times to 800 billion Kwh in 2030. According to Electricity of Vietnam’s estimation, the high demand will require Vietnam to call for more than $150 billion in new capital investment.
Obviously, renewable energy is an ideal solution to reduce the greenhouse effect in many countries including Vietnam. Renewable energy helps to reduce toxic emissions from fossil fuels and soothe the air pollution. In addition, using replenished natural resources will diversify the country’s energy sources and reduce the cost of imported fuels from other developed countries. When power stations are run officially, more jobs in manufacturing and installation will be created and opportunities for economic development are brighter.
Renewable energy has been the cheapest form of new power generation. The alternative is highlighted thanks to the country’s natural endowments of solar and wind along with the decrease in capital cost in each area over the past 5 years, which has been recorded as a 75% drop in solar capital cost and a 30% drop in the capital cost of wind. As a result, the Levelized cost of electricity for renewable energy is lower than that of traditional energy using thermal resources to generate power.
Another merit of concentrating on renewable energy is the lower risk. Power stations for renewable energy can be built quickly and located flexibly to meet the Vietnam load-growth requirement.
Vietnam renewable energy current status
Vietnam has surpassed the initial target of generating and applying renewable energy in daily life. First, Vietnam aimed to reach 7% of renewable energy usage, but then in July 2019, the number got 9% in the energy mix. Le Hai Dang, a strategy board member of EVN, shared that solar energy capacity was 4,543 megawatts (MW) and wind power capacity was 626.8 megawatts (MW) in July 2019.
Vietnam is endowed with abandoned natural resources: four to five kilowatt-hours per square meter for solar and 3,000 kilometers of coastlines with the wind in the range of 5.5 to 7.3 meters per hour. Nevertheless, it seems that Vietnam has taken full advantage of the tremendous potential of these resources. The market for renewable energy in Vietnam is still in the embryonic stage, only about 200 megawatts of grid-scale of renewable solar and wind capacity.
According to McKinsey, a global constant firm, if Vietnam soon takes advantage of natural resources to generate renewable energy, the country will save a lot of money and effort to meet the great needs for power. For example, the renewables-led pathway which is analyzed and suggested by the firm has shown huge benefits for Vietnam.
From the chart demonstrated by McKensey, the number of fossil fuels used to create power will decrease gradually from 2018 to 2030 while solar, wind and the hydro dam will be used more frequently. The Renewables-led pathway brings to cheaper, cleaner energy, fuel security and job creation for Vietnam. Vietnam will save 10% of the overall total power cost through 2030. Besides, the renewables-led pathway also enables Vietnam to depend on 28% less total fuel and 60% fuel import than the current plan (Master Plan 7).
Power Development Master Plan 8 emphasizes renewable energy
The power development master plan 8 is proposed by the Ministry of Industry and Trade under the vision of 2021 – 2030. Unlike the Master plan 6 or 7 which relies heavily on traditional power resources namely hydropower, thermal power, and gas turbines, Master plan 8 focuses on renewable energy.
The government will take an eye on solar and wind resources which are affected by the weather. Hence, Vietnam is trying to make sure that there is no interference in the supply. With more than 1,780 hours of sunlight per year, Vietnam is coming up with ideas to make use of the energy resource more effectively and efficiently.
How to invest in renewable energy in Vietnam
This part aims to give you a brief guide and general information about investment in renewable energy in Vietnam. The information below is extracted from Duane Morris – a global law firm.
Before planning, it is obvious that you have to thoroughly research the Vietnam market and the regulation, tax policy for foreign companies to enter the market.
– Investors have to comply with prior agreement of EVN on power purchase before the licensing procedure.
– Ensure that the commitment of banks or credit firms on financing the project has to be got before the insurance of the Investment Registration Certificate.
– In-principle approval of the local People’s Committee is required prior to issuance of Investment Registration Certificate based on the project size.
– A solar power plant must obtain a power generation permit from the competent State authorities in order to conduct power generations in Vietnam.
– Term of permit: maximum 20 years for large power plants which have particularly important meaning on the economy, society, national defense and security approved by the Prime Minister and 10 years for other power plant projects.
– The permit can not be renewed but investors may apply for a new one within 60 days prior to the expiry date of the current plan.
– Step 1: Investors obtain approval from the competent authorities approving the solar power plant project as part of the power development master plan.
– Step 2: Investors obtain in-principle approval from the competent People’s Committee approving the solar power plant project, land demand/ location, environment, construction plan, other terms of the project.
– Step 3: Application for issuance of the Investment Registration Certificate and the Enterprise Registration Certificate.
– Step 4: Preparation of construction/ operation of solar power plant (For instance, acquiring land area, site clearance, preparation…)
– Step 5: The project company gets necessary permits and relevant agreements for its and the power plant’s operation.
– Step 6: Construction of solar power plant and operation.
Additionally, you can look for further information relating to FDI in Vietnam at Viettonkin’s blog.
In conclusion, renewable energy is a low-cost solution to the high demand for energy in Vietnam. It is predicted that renewable energy will become a focal point in the latest Development Power Master Plan. Under the new Master Plan vision 2021 -2030, foreign investors have a lot of opportunities to enter the market and implement the power project. We hope that you will find something interesting in renewable energy in Vietnam.